India’s construction equipment industry is heading for another year of muted growth, with volumes expected to rise only 2–4% in FY26 — roughly matching last year’s performance — according to Crisil Ratings.
Despite a strong export surge, sluggish domestic demand caused by slower road execution, stabilising real estate activity, and higher equipment costs under the new CEV-V1 emission norms has capped momentum.
Exports Cushion Domestic Weakness
The industry is projected to sell about 1.45 lakh units this fiscal, with domestic sales accounting for nearly 90% of total volume. However, in the first half of FY26, total volume slipped 1% year-on-year, cushioned by a 35% jump in exports.
Export orders from Africa and Latin America have provided critical support as domestic projects lag behind.
“Road construction, a key demand driver, is expected to slow to 23–25 km per day this fiscal from 34 km in FY24,” said Anuj Sethi, Senior Director, Crisil Ratings.
“Extended monsoon, weaker project awards, and stabilising real estate activity have all contributed. Faster awards and execution in the remainder of this fiscal will be crucial to complete the ₹11 lakh crore infrastructure outlay.”
Emission Norms Raise Costs, but Open Global Doors
The rollout of CEV-V1 norms from January 2025 — aligning Indian machinery with international environmental standards — has increased costs by 12–15% but also improved product reliability and export readiness.
“The new emission norms have enhanced product acceptability in advanced markets,” said Poonam Upadhyay, Director, Crisil Ratings.
“This opens doors to regions like Europe, North America, and Japan. India’s ability to leverage these opportunities amid global uncertainties will be key to sustaining exports.”
With domestic demand stagnating, the continuation of export momentum is expected to be the main driver of the forecasted 2–4% growth.
Revenue, Margins, and Credit Profile Stable
Despite the modest volume growth, industry revenues are expected to rise 6–8% this fiscal, supported by selective price hikes and firm export realisations.
Operating margins, however, are likely to contract slightly to ~11%, down from 12% last year, as manufacturers absorb higher compliance costs.
Crisil’s analysis of 17 manufacturers, covering nearly 75% of the market, indicates that capital discipline and stable steel prices will help keep leverage and credit profiles healthy.
Sector Mix and Growth Drivers
Roads account for 40% of equipment demand, followed by mining (25%), real estate (15%), and infrastructure segments such as railways, water, and power.
In terms of product mix, earthmoving machinery dominates with nearly 70% share, while material handling, concrete, and road equipment make up the rest.
Outlook: Exports to Lead, Domestic Recovery Key
The next fiscal will depend on faster infrastructure execution and sustained private capital expenditure.
While the government’s infrastructure push remains strong, execution bottlenecks and monsoon-related delays could continue to constrain equipment demand.
The industry’s medium-term recovery will hinge on how effectively India converts its export momentum into long-term global market access.
